I’m a Leverage Finance banker, this is how I see the markets playing out.

by smerff

First of all, I’ve lost $12k since yesterday mornings open. LYV, NCLH, and SIX puts that I bought yesterday. I’m not worried, I know I’ll be cashing before their expiration.

We’ve got more to fall. A lot more. Credit agencies have barely started their corporate downgrades yet. No bond or loan payments have been defaulted on yet. The bankruptcies haven’t started yet. They’re coming.

Corporate debt was at record highs. Balance sheets were in trouble before this happened. Companies have been levering up 7x+ (debt/ebitda). The missed revenue, and trust me it’ll be a substantial number, is going to cause companies to be unable to service their debts. Many will have to restructure. Others will be forced into a liquidation.

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I work in corporate banking (leveraged finance). Trust me, I don’t want the markets and economy to continue to free-fall. I will certainly be out of a job. My loved ones and friends will be out of jobs. Our 401k’s, brokerage accounts, everything, will all be compromised. Life as we know it will change, just as it did following the mortgage crisis.

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This is the last thing I want, but I see it as inevitable. I’m not a trader (as clear by my -$12k lol), but I do work in leveraged finance within the capital markets, and as such, this is how I truly believe the situation to play out.

Stay healthy, stay safe.

Edit: my positions

NCLH 4/17/2020 $7.50p

SIX 9/18/2020 $7.50p

 

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.

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